Tag: accounts

Towards a level playing field in ‘Business Correspondent’ model of banks

Banking & Finance

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The Reserve Bank of India (RBI) should rationalise the interchange fees for Aadhaar Enabled Payments System (AePS) transactions and also disincentivise Business Correspondents (BCs) for unfair business activities to generate commission, according to State Bank of India’s economic research report Ecowrap.

This can ensure a level playing field in the BC model followed by public sector banks (PSBs) and other banks.

AePS is a bank-led model that allows online interoperable financial inclusion transactions at point of sale/PoS (micro ATM) through the BC of any bank using Aadhaar authentication.

BCs are retail agents engaged by banks to provide banking services at locations other than a bank branch/ATM.

How to make BCs more viable

PSBs mostly follow ‘branch-led BC model’, while other banks follow ‘branch less/ micro ATM/kiosk application on mobile/corporate BC model’ for financial inclusion.

Three key facts

The report underscored three facts — more than 77 per cent Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts have been opened by PSBs; the number of BCs/customer service points (CSPs) of other banks largely outnumbered that of PSBs and, over the years, OFF-US transactions are increasing.

Data indicate that the share of AePS “OFF-US” transactions (where the card issuing bank and acquiring bank are different entities) in AePS increased from 4 per cent in September 2016 to 51 per cent in September 2021.

In AePS “ON-US” transaction, the card issuing bank and the acquiring bank are the same entity.

“Considering these facts, PSBs (that opened around 77 per cent of the PMJDY accounts) are now net payers of interchange fee. We estimate that the PSBs could be paying ₹600-700 crore per annum as interchange fee,” said Soumya Kanti Ghosh, Chief Economic Adviser, SBI.

He emphasised that since AePS works like a PoS, logically the ‘acquiring bank’ (the bank which has installed the PoS terminal at the merchant location) should pay the interchange fee to the ‘issuing bank’(the bank which has issued the card to the customer).

Alternatively, there could be rationalisation in interchange fee as there is no level playing field in infrastructure provided by all banks.

Holistic financial inclusion

With requisite savings, banks can further strengthen/upgrade their BC model and promote financial inclusion in a more holistic manner, the report said.

Currently, the account opening bank pays an interchange fee to the operator of the BC/ CSP when a customer makes a transaction at micro ATM that does not belong to the account opening bank (that is OFF-US transaction).

At present the interchange fee is 0.5 per cent of transaction amount (minimum ₹1 and maximum ₹15) for an OFF-US financial transaction and ₹5-7 for non-financial transaction.

The report noted that BCs convert AePS ON-US transactions of one set of bank customers to AePS OFF-US issuer transactions and also carry out multiple AePS ON-US and AePS OFF-US transactions on the primary bank application/software.

Women Business Correspondents: Agents of change in India’s financial inclusion

SBI’s economic research department cautioned that the ‘micro ATM/kiosk application on mobile’ model might also lead to several frauds as the mobile BCs introduce themselves as government persons and need biometric authentication to provide different types of subsidy.

PSBs, who are active in financial inclusion activities, have opened a large number of PMJDY accounts (out of 44 crore accounts, PSBs opened 34 crore accounts and non-PSBs 1.3 crore, rest RRBs) with minimal balance and thus incur recurring expenditure by way of servicing such customers, including issuance of free RuPay debit card, besides monthly remuneration for BC operations.

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Crypto bourses block accounts as red flags rise, BFSI News, ET BFSI

Personal Finance

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Indian cryptocurrency exchanges have started reporting and blocking trading accounts, which undertake suspicious trades after government agencies raised red flags over cryptocurrencies being used for money laundering.

The self-regulation comes at a time when India is yet to come out with any regulations around cryptocurrencies or the way to tax them. Industry trackers say investigators including cybercrime officials, the Enforcement Directorate and the income tax department, had raised red flags in the past few months.

Also, top crypto exchanges are getting requests from foreign investigators regarding certain suspicious accounts.
For instance, WazirX, one of the largest cryptocurrency exchanges in the country, recently declared the numbers in what it calls a “transparency report”.

Between April and September this year, the exchange got 377 requests from legal enforcement agencies, out of which 38 requests were from foreign law enforcement agencies. The crypto exchange locked about 1,500 accounts.

In all, the exchange locked 14,469 accounts, although most of them were after customers asked them to stop services or there were some other payment issues.

“Initiatives such as the transparency report add credibility to the ecosystem and make the crypto world look more appealing to outsiders,” Nischal Shetty, CEO and founder, WazirX. “We aim to look at the bigger goals like positive regulations and consider ourselves paving the way to it through innovative approaches.” Many regulators in India had raised red flags around certain cryptocurrency transactions.

Exchanges have said they have developed a strong internal anti-money laundering policy as well.

“In India, we are bringing our four years of robust policy with our technologies to make sure we build products and services which help in crypto adoption but at the same time minimise the risk of money laundering,” said Kumar Gaurav, founder & CEO, Cashaa.

The exchanges waking up to money laundering and other regulators also come at a time when India is planning to come out with a cryptocurrency regulation.

There has always been regulatory scepticism around cryptocurrency and whether it can be used for illegal activities from buying drugs to money laundering.

The exchanges have always claimed that if the cryptocurrency is based on a blockchain technology, all the records are permanent and, in fact, it would be easier to discover the exact nature of the transactions.

“The report and the think tank is part of our efforts to bring more clarity and build transparency for our users and policy makers in India around everything crypto,” said Aritra Sarkhel, director of public policy at WazirX. Most of the large exchanges have seen between 100% and 400% jump in their volumes and value of trade that happen on their platforms amidst the global rally and some hope on the domestic regulatory front.



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Cashfree launches Banking-as-a-service offering ‘Accounts’

Banking & Finance

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Bengaluru-based Cashfree, a digital payments and banking technology company on Monday launched its Banking-as-a-service offering ‘Accounts’ to help neo-banks and fintech platforms integrate banking services into their product.

Accounts will allow businesses to offer features such as account opening, linking, deposits, check balance and interest earning to their customers, partners and vendors, the company said in an official release. It will help enable 100 per cent paperless bank account creation.

Also read: Cashfree raises funds from SBI

Currently supporting the creation and management of current accounts, Cashfree intends to add support for savings accounts, virtual accounts and other payments instruments soon.

“The product is currently running pilots with fintech start-ups, and will also enable other technology platforms to generate and customize payment instruments using Cashfree APIs,” it said.

Akash Sinha, CEO and Co-Founder, Cashfree said, “India is witnessing a dramatic rise in the number of digital-first start-ups and enterprises. While the ecosystem is evolving rapidly to adapt to the change, start-ups and tech-first businesses often struggle with access to banking services.”

“Cashfree aims to build a bouquet of Fintech APIs to help empower businesses and individuals. Our first product under it, ‘Accounts’, will not only allow businesses to open banking accounts for their customers to collect payments and make payouts easily, but also bring their customers under the fold of digital payments,” said Sinha.

The announcement comes close on the heels to the launch of the Account Aggregator ecosystem last week.

Cashfree works closely with all leading banks to build the core payments and banking infrastructure that powers the company’s products, and is also integrated with major platforms such as Shopify, Wix, Paypal, Amazon Pay, Paytm and Google Pay, it said.

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No freezing a/c for KYC, digital proof can be final, BFSI News, ET BFSI

Banking & Finance

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The RBI on Wednesday relaxed KYC (know-your-customer) norms to enable the process to be completed remotely and prevent banks from freezing accounts in which such data has not been updated.

“In respect of customer accounts where periodic updation of KYC is due and pending as on date, no restrictions on operations shall be imposed till December 31, 2021, for this reason alone, unless warranted under instructions of any regulator/ enforcement agency/ court of law,” the RBI said in a circular. Earlier, SBI had given similar instructions to its branches after a directive from the finance minister through a tweet.

While the central bank’s directive gives relief to customers of all RBI-regulated entities, a larger reform is the enabling of digital KYC. Currently, banks are completing the KYC process for individuals remotely using video-based customer identification (V-CIP). This process has been extended for businesses including proprietorship firms, authorised signatories and beneficial owners of legal entities.

Earlier, accounts opened using Aadhaar-based e-KYC were treated as ‘limited KYC’ accounts. These will now be treated as fully compliant accounts. Entities looking to complete the KYC process can now use KYC Identifier of Centralised KYC Registry (CKYCR) for V-CIP.



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FIDC seeks relief measures in wake of second Covid wave

Banking & Finance

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Concerned about the impact of the second wave of Covid-19 infections, Finance Industry Development Council has sought relief measures including restructuring for retail and individual borrowers of non banking financial companies (NBFCs).

In a representation to Reserve Bank of India Governor Shaktikanta Das, FIDC has asked that borrower accounts, irrespective of whether or not they had been restructured earlier and if they are standard accounts as on March 31, 2021, may be allowed restructuring without any downgrade in asset classification, subject however to the lending NBFCs undertaking fresh credit assessment of the borrowing entity.

“We wish to bring to your kind notice that the second wave of Covid- 19 has already started impacting the industry, more so the above self- employed segment of customers having little or nothing to fall back upon,” FIDC said in the letter.

NBFCs under pressure

It also pointed out that with many states like Maharashtra, Chhattisgarh, Madhya Pradesh, Karnataka, Rajasthan, Tamil Nadu and NCR already under lockdown or lockdown-like strict conditions, which has resulted in closure of NBFC branches. It is becoming increasingly difficult to reach customers for collections as their business has come to standstill and their livelihoods are under threat, it further said.

“It will not be long before the NBFC industry starts reeling under pressure of increased NPAs and at the same time, handling demand of moratorium and/or restructuring from its existing and deserving customers,” FIDC said.

Loan restructuring

It has also asked the RBI to allow standstill on buckets for restructured accounts for the first quarter of the current fiscal.

FIDC has also sought restructuring of loans taken by small NBFCs (having asset size of less than ₹500 crore) from banks and FIs and to avoid ALM mismatch arising out of restructuring of their customers’ accounts.

It has also asked the RBI for liquidity support to small NBFCs for on lending to micro, small and medium enterprises.

“We urge the RBI to increase the overall support outlay to AIFIs from ₹50,000 crore to at least ₹75,000 crore,” FIDC said, adding that benefit of PSL classification for lending by banks to

NBFCs for on-lending may please be regularised as part of the overall PSL policy.

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